December 6, 2013

Urge Lawmakers to Reject PBGC Premium Increases as Part of Budget Deal

Action Requested: Contact your congressional delegation, especially those members serving on the federal budget conference committee, congressional leadership and the other committees of jurisdiction, urging them to reject Pension Benefit Guaranty Corporation (PBGC) premium increases as part of a short-term budget deal.

Background and Discussion:
As we have previously reported, a conference committee of the U.S. Senate and House of Representatives is in negotiations to reach a final compromise on a budget for Fiscal Year 2014 by December 13. It is likely that such a budget agreement will require new federal revenue to offset other costly priorities.

The Council has learned PBGC premium increases are "in play" and could well be included in the final recommendations. The exact amount of these increases is still unclear. We are hearing that over the 10-year budget period, the increase could be in the $6 billion to $16 billion range, but the numbers can change on a day to day basis. In fact, since the Obama Administration asked for $25 billion in its budget proposal, it is distinctly possible that the increase could be more than $16 billion. To put this in perspective, the very large increases enacted in 2012 (as part of the MAP-21 legislation) raised $9 billion over 10 years.

In addition, it is possible that the premium increase will be based on the financial soundness of the plan sponsor. Both the Senate Democrats' budget blueprint and the White House have suggested establishing risk-based premiums for companies with underfunded pension plans.

The Council has consistently expressed doubts regarding PBGC's self-reported $36 billion "deficit" that is driving some of the discussion about raising premiums, noting the lack of transparency and criticizing the methodology PBGC uses to estimate its deficit while also voicing strong concern with giving the agency unilateral authority to establish premium levels. In a November 15 news release, Council President James Klein stated that raising PBGC premiums "would further discourage plan sponsors from remaining in the system when the current low interest rate environment is already forcing employers to pour more money into plans that may never be needed. As more companies are forced to exit the system, the universe of plans from which premiums are collected further shrinks. That certainly does not serve the PBGC's interests."

Your help is needed.
Please contact members of the House and Senate where your company has a presence or with whom you have a relationship. In particular, please contact members of the House-Senate budget conference as well as the House Education and Workforce Committee, House Ways and Means Committee, Senate Health, Education, Labor and Pensions (HELP) Committee, and Senate Finance Committee (see below) to express your concern over an increase in PBGC premiums within the context of a possible budget deal.

It is important that congressional members, especially budget conference committee members and leadership, hear directly from companies expressing concern about changes to the premiums. PBGC's single-employer funds are clearly sufficient to pay benefits for the foreseeable future, and once interest rates return to normal, there will be no deficit. The only real threat to PBGC is an additional premium increase, which will drive even more employers out of the system, thus shrinking PBGC's premium base.

Contact Links:

Obtain your congressional delegation's contact information here.

Budget Conference Committee:
Budget Committee Chair Patty Murray (D-WA)
Ron Wyden (D-OR)
Bill Nelson (D-FL)
Debbie Stabenow (D-MI)
Bernie Sanders (I-VT)
Sheldon Whitehouse (D-RI)
Mark Warner (D-VA)
Jeff Merkley (D-OR)
Chris Coons (D-DE)
Tammy Baldwin (D-WI)
Tim Kaine (D-VA)
Angus King (I-ME)
Jeff Sessions (R-AL)
Charles Grassley (R-IA)
Mike Enzi (R-WY)
Mike Crapo (R-ID)
Lindsey Graham (R-SC)
Rob Portman (R-OH)
Pat Toomey (R-PA)
Ron Johnson (R-WI)
Kelly Ayotte (R-NH)
Roger Wicker (R-MS)

Budget Committee Chair Paul Ryan (R-WI)
Tom Cole (R-OK)
Tom Price (R-GA)
Diane Black (R-TN)
Chris Van Hollen (D-MD)
James Clyburn (D-SC)
Nita Lowey (D-NY)

House and Senate Leadership

House Ways and Means Committee

Senate Finance Committee

House Education and Labor Committee

Senate Health, Education, Labor and Pensions Committee